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HMRC internal manual

Inheritance Tax Manual

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HM Revenue & Customs
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Special valuation matters: land sold under a binding contract entered into after the death

If the taxpayer informs you that land has been sold within 4 years of the death for less than the value agreed for the date of death loss on sale relief (IHTM33001) may be available. However, these instructions concentrate on the affect of sales on ascertaining the date of death value of the property. In particular, they identify certain situations in which a VOA (IHTM23002) referral can be dispensed with subject to various safeguards being met. They apply to taxpaying cases where the sale occurs whilst our file is open and the share to be valued is the whole (there is a separate instruction regarding fractional shares of joint property (IHTM23184)). These instructions do not apply where a binding contract for sale was entered into before the death (IHTM23186).

Sales of property, both before and after the VOA have considered the valuation offered by the taxpayer, can be problematic. If there are any problems in this area, please consult your Team Leader (Compliance Group) or refer to TSS (PC&S). Subject to this, cases where the taxpayer informs you of a sale should generally be dealt with as follows

  • Where the sale occurs after death but before the VOA referral
    • If the sale is under a Housing Association/Sheltered Housing Scheme (IHTM23181) you should follow the appropriate instructions
    • Where the IHT405 indicates that a sale has taken place and that the taxpayer is willing to adopt the gross sale price as the date of death value, there is no need to refer the matter to the VOA. However, this is subject to establishing with the taxpayer that the sale was for full consideration (IHTM28382) and was not made to a ‘connected person’ (IHTM04164).
    • Where the IHT405 indicates that sale contracts have been or are about to be exchanged, and the taxpayer is willing to adopt the gross sale price, dispense with the VOA referral. This is subject to the safeguards above, and providing the sale is completed within a reasonable period of receipt of the HMRC Account (say two months maximum). In this situation, please keep in regular contact (preferably by telephone) with the taxpayer about progress. If a problem about the timing of sale emerges, it will be important not to unduly delay any necessary VOA referral. (The short timescale quoted reflects the market conditions of recent years, during which values have been quite volatile.)

 

  • If the sale notification is received while the VOA is considering the value
    • it is possible that the VOA will be aware of the sale. But, if this is not self evident from the correspondence, you should establish with the taxpayer whether they are prepared to adopt the sale price as the date of death value or, if not, what impact, if any, they consider that the sale price has on the date of death value. If so, and the relevant safeguards above have been checked, please notify the VOA on VOA 4 and arrange for their case reference to be ended. If not, you should notify the VOA accordingly and ask them to have regard to the sale price when considering the relevant value.

    • Where a sale is notified after the VOA Report is received but before you have informed (IHTM23153) the taxpayer about it

      • your approach should be guided by what information, if any, about the prospective sale, and the taxpayer’s wishes in this respect, were contained in the IHT405, or later correspondence. Also, the VOA 1 Acknowledgement Slip (IHTM23071) and/or any other VOA communication should indicate whether or not they have been in touch with the taxpayer.

        If it appears that the taxpayer was not aware of the VOA’s initial view, ask them to what extent they consider that the sale price has an impact on the date of death value (unless they pre-empt this by making appropriate comments). On receipt of their views you should proceed as follows

      • if they offer a revised higher value, you can accept this without re-referral to the VOA unless you are prevented (IHTM23162) from re-opening the valuation (but bear in mind market movements between the dates of death and sale – in some instances, the parties appear to overlook this and to assume that any sale price achieved within 12 months of the date of death should be substituted automatically)
      • if they offer a lower value invite them to submit a claim for loss on sale of land relief
      • if they do not wish to offer a revised value do not seek to re-open the valuation (unless there is reason to suppose that all material facts about a prospective sale have not been disclosed in connection with the original value offered)
  • If you have already informed the taxpayer about receipt of the report and,

 

* and they do not offer an alternative value, 
* do not seek to re-open the valuation (unless there is reason to suppose that all material facts about a prospective sale had not been disclosed in connection with the original value offered). 
* offer a revised date of death value then you 

  
  
* may accept the higher revised value offered without re-referral to the VOA, unless you are prevented from re-opening the valuation, or
* should invite them to submit a claim for loss on sale of land relief if they offer a lower revised value